The Smart Buyer: Brokerage market on the rebound

Posted on 01 June 2011
Written by Jim Flannery

Spring is in the air and with it the yen to escape cabin fever and get on the water, which yacht brokers say translated into more brokerage activity in the first three months of 2011. They are hoping for a blossoming of brokerage sales this year after a long, cold, three-year winter of consumer hibernation.
"In the last 30 days we [in early April] have gone from very little activity to a whole bunch of activity," says Brian Larsen, sales manager at Larsen Marine, a yacht brokerage and dealership with offices in Waukegan, Ill., and Racine, Wis. (www.larsenmarine.com).

He says some of that activity is seasonal, but Larsen - whose sales are 80 percent sailboats - also closed on a couple of sales in January at the Chicago boat show, so he's upbeat. "Sailboats are picking up quite nicely," he says.

Brokers say sailboats have come back stronger than powerboats and have held their value better. Mainstream sailboats typically have lost just 10 percent and probably not more than 20 percent of their value during the recession, says broker Roderick Rowan, of Crusader Yacht Sales, a sailboat, trawler and Down East powerboat brokerage and dealership in Annapolis, Md. (www.crusaderyachts.com).

Powerboats in general are down at least 25 percent in value, and some high-volume production powerboats are down as much 40 percent from before the recession, says David Pugsley, general manager of Brewer Yacht Sales, which has 22 locations in New England (www.breweryacht.com).

Pugsley says the plunge in the value of high-volume production boats reflects the realities of supply and demand, not the quality of the boats. If there are 1,200 Sea Ray 29s for sale, buyers are going to snap up the cheapest ones.

"There is a market [for powerboats]," Pugsley says. "People are willing to buy them, but they smell blood in the water. They know they can get them for less."

"Anything with a gasoline engine that's 40 feet long you can forget about unless someone's going to park it at the dock and live on it," he says.

The market for boats with twin 454-cubic-inch gasoline engines is "nonexistent," he says. Buyers are looking for more fuel-efficient engines and good deals on diesel boats, which "retain their value better than gasoline engines," says Pugsley. He says that is considered a good buy - a shrewd investment - in today's market.

In Sarasota, Fla., Gary Smith, co-president of Sarasota Yacht and Ship Services (www.sarasotayacht.com), says he has seen a dramatic increase in brokerage activity during the last year - lots of inquiries and a slow but steady increase in sales. Still, buyers are very picky. They want a late-model boat in top condition, priced at or near the bottom.

"You used to have to have one of those things," Smith says. "It either had to be cheap or really nice. Now it has to be all of those things."

Smith says his sales are "all over the board" - sailboats, 45- to 60-foot powerboats, smaller "30ish" trailerable powerboats, even a 170-foot expedition ship. He attributes the uptick in sales to several factors. A lot of the distressed inventory - boats in foreclosure - has been sold, enabling prices to begin to stabilize. He says buyers and sellers are getting closer on price.

"Sellers are realizing this is not a depressed market. It's a new market reality," he says. "Buyers are seeing the bottom is either here or near."

Smith says he saw new life in that market last October at the Fort Lauderdale boat show and again in February at the Miami show. "There was a new electricity in the air," he says.

The company sold new boats at both shows. Nonetheless, it's still a buyers' market, he says. Inventory is high; prices are soft.

Fuel prices also continue to climb and this has led many buyers to take a hard look at fuel efficiency. Sailboat sales largely have been unaffected by rising fuel prices, Rowan says, but buyers looking at his trawlers and Down East powerboats are seeing miserly single-screw models with smaller engines.

"Speed isn't everything," he says. Neither is size. Rowan thinks this has more to do with changing tastes than fuel prices, but he sees more buyers moving up in quality instead of size when they decide to buy another boat.

"Twenty years ago you bought the biggest boat you could get for your money" and then aimed for a bigger one a couple of years later. "People are getting away from that," he says.

Credit pipelines are opening again and funneling loans to boaters. Although many buyers still choose to forgo financing and pay cash, loans are available, brokers say. "Absolutely, they are available," Larsen says. "But your credit score has to be good. [Lenders] aren't doing much for mediocre-to-poor credit risks."

Brokers hope their used-boat sales keep improving - slowly but steadily - into the summer, but none of them claim to have a crystal ball. The outlook for oil prices remains uncertain, although most observers expect them to keep rising, and international politics and economics are always a crapshoot.

"I'm encouraged by what has happened over the last six weeks," Larsen says. "But I really don't know what's going to happen in the next six weeks."